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    Assignments 9.1 and 9.2

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    Caranza Company is a luxury cosmetics distributor that opened in October. Transactions that month included cosmetics sales, collecting from customers, paying suppliers, salaries, rent expense, purchasing new merchandise on account, and obtaining a bank loan. The summary provides journal entries for these,

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    Assignments 9.1 and 9.2

    Uploaded by

    carmen.magarinosb
    66 views2 pages
    Caranza Company is a luxury cosmetics distributor that opened in October. Transactions that month included cosmetics sales, collecting from customers, paying suppliers, salaries, rent expense, purchasing new merchandise on account, and obtaining a bank loan. The summary provides journal entries for these,

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    Caranza Company is a luxury cosmetics distributor that opened in October. Transactions that month included cosmetics sales, collecting from customers, paying suppliers, salaries, rent expense, purchasing new merchandise on account, and obtaining a bank loan. The summary provides journal entries for these,

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    66 views2 pages

    Assignments 9.1 and 9.2

    Uploaded by

    carmen.magarinosb
    Caranza Company is a luxury cosmetics distributor that opened in October. Transactions that month included cosmetics sales, collecting from customers, paying suppliers, salaries, rent expense, purchasing new merchandise on account, and obtaining a bank loan. The summary provides journal entries for these,

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Accounting and Financial Management

    Lesson 9. Problem assignments

    Problem assignment 9.1. Journal entries and ledger posting1

    Two partners formed Esteiro Fashion Company on 1 January year 1. The first operations
    performed are:

    1 On day 3rd of January, the setting of a limited liability company with a share
    capital of 20.000 €, fully disbursed equally by the two partners and paid into
    the current account of the company at bank CorpoBank.
    2 On the same day, business premises are purchased for 10.000 €, fully paid
    by bank cheque against the current bank account of the company.
    3 On January 5th the company buys a further 5.000 € of equipment on credit.
    This amount will be paid in two maturities at 30 and 60 days, with no
    interest charge.
    4 One employee is hired on January 6th for a total monthly salary of 1.800 €,
    to be paid on the last day of each month (Note: in January she will be paid
    24/30 parts, so 1.440 €).
    5 By month-end, customers have paid by bank transfer in total the sum of
    10.000 € of the 15.000 € they owe to the company for all the diary sales
    recorded. The cost of these sales has been 8.000 €, fully paid in cash agains
    the bank account. (Note: there is no need of recording each sale for this
    assignment, just one single entry for the totals).
    6 Supplies, maintenance, and other minor expenses make a total of 500 € for
    the month of January (Note: again here, you can record one single entry for
    the total).

    Required
    (a) Prepare journal entries to record each of the above transactions.
    (b) Post the entries to ledger accounts.
    (c) Prepare a trial income statement and balance sheet for Esteiro Fashion Company
    at the close of 31 January year 1.

    Check figures
    Total assets, 30/1 30,060

    1
    Adapted from Sutton (2004) and Reverte (2014)
    Problem assignment 9.2. Journal entries and ledger posting2

    Caranza Company is a distributor of luxury cosmetics, formed in September 2021, and


    its balance sheet just prior to the start of trading is as follows:

    CARANZA COMPANY
    Balance sheet
    30/9/2021

    Non-current assets 35,400 Shareholders' equity 54,000


    Vehicle 9,000 Share capital 54,000
    Office equipment 7,400
    Shop equipment 19,000 Non-current liabilities

    Current assets 62,800 Current liabilities 44,200


    Prepaid rent (for three months) 6,000
    Inventory 38,000 Accounts payable 44,200

    Cash 18,800

    Total assets 98,200 Total equity and liabilities 98,200

    The company’s first retail outlet opened its doors for business on 1 October. The
    company’s transactions in October are summarised below.

    1 Cosmetics are sold for 40,000€: 22,000€ on account, the balance for cash.
    The cost of items sold is 20,000€.
    2 The company collects 7,000€ of amounts owed by customers, and It pays
    34,000€ to suppliers for inventory and office equipment it purchased on
    account in September.
    3 The company has two employees. Each earns a salary of 1,000 in the month.
    4 Rent expense is recognised for a monthly sum of 2,000. The rent
    prepayment made in cash at end-September represents three months of
    rent.
    5 The company has purchased new merchandise for 24.000 €, which will be
    paid in three installments within 30, 60, and 90 days, respectively, with no
    interest charge.
    6 A bank loan has been signed for 50.000 € to finance future investments. At
    the end of the month, the money is still deposited in the company’s bank
    account, and 250€ in interests have been paid on October 31st.

    Required
    (a) Prepare journal entries to record each of the above transactions.
    (b) Post the entries to ledger accounts.
    (c) Prepare income statement and balance sheet for Peerless Company at the close
    of 31 October x1.
    Check figures
    Total assets, 31/10 153,950
    2
    Adapted from Reverte (2014) and Sutton

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